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The example par excellence of that is digital switchover. Digital terrestrial television and digital radio have both developed rapidly because of the BBC’s commitment and investment. Commercial
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companies have also innovated and invested, but it is the BBC that has the reach and the duty to ensure that new technology does not lead to a new divide. The BBC’s enormous contribution to digital take-up through Freeview has led to increased competition, choice for the viewer and innovation. The BBC also has the trust of people, who are more prepared to get interested in new technologies if they know that the BBC is their guide.

Mr. John Maples (Stratford-on-Avon) (Con): One of the issues that bothers some of us is that the BBC is taking a great deal of licence payers’ money and a lot of money out of some of its programming to finance its new digital platforms, particularly its website. It is doing that in competition with people in the private sector who have to compete for their revenues and raise their own capital. At some point, that can become really unfair competition and a misuse of licence fee payers’ money. I would be grateful if the Secretary of State clarified where she believes the dividing line is in that respect. Is she in a position to give any direction at all in the new agreement with the BBC as to what is proper use and what is misuse of licence fee payers’ money?

Tessa Jowell: I thank the hon. Gentleman for making that point, because it is one that we have taken very seriously. It is a matter of enormous concern to the wider market and it is important to note that the BBC Trust has an overriding duty of responsibility to the interests of the licence fee payer. It is quite possible that, where the BBC chooses to innovate and that same innovation is under way in the private sector, the BBC’s proceeding with that innovation may have the effect of constraining the choice available to the wider consumer. That is why there is a new competition regime that will be applied by the BBC Trust in partnership with Ofcom and also why we are insisting that the public value test that the BBC has to conduct in relation to any new service or substantial change to an existing service must include a market impact assessment. That will happen for precisely the sort of reasons that the hon. Gentleman mentioned.

Mr. David Drew (Stroud) (Lab/Co-op): Will my right hon. Friend give way?

Tessa Jowell: With respect, I want to make some progress and I know that many other Back Benchers wish to speak.

The Government are committed to full switchover by 2012 because we want the benefits of digital, including increased choice, to be available to everyone and to enable the British economy to benefit from a more efficient use of spectrum. The process is well under way with 72.5 per cent. of households already receiving digital TV. However, we recognise that many may remain unconvinced and there is no organisation better placed than the BBC to demonstrate the advantages of digital and to ensure its availability on a universal basis.

The market has had, and will continue to have, a very large role to play, but in the end it is the BBC, with its reputation and its reach, that will bring everyone into the digital future. That is a perfect illustration of
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how the market and the BBC working together can do something that neither could do alone. We have developed a unique broadcasting landscape in this country, with purely publicly funded broadcasters offering their wares alongside purely commercial ones. In many cases, they are united by public service broadcasting obligations.

Alan Keen (Feltham and Heston) (Lab/Co-op): I understand that there is some co-operation in that the BBC is assisting Channel 4 with some of the costs of digital switchover and also providing some spectrum. Will the Secretary of State report further on that?

Tessa Jowell: My hon. Friend is right. As we stated in the White Paper, it is certainly the Government’s intention to maintain plurality in public service broadcasting. It is reasonable for the BBC to seek to help Channel 4 with its build-up costs as part of the switch to digital. The BBC Trust will be expected to look into other costs further down the line, once we are closer to the act of digital switchover.

Mr. Drew: Will my right hon. Friend give way?

Tessa Jowell: I will, but this will be the last time.

Mr. Drew: Important though it is to get the switchover to digital television right, does the Secretary of State also accept that it is important to do the same for digital radio? In particular, we need to ensure that local radio is not disadvantaged within the BBC family. Will she give an assurance that that is part of the strategy and that the BBC will devote sufficient resources to guarantee that local radio will have not only a continuing, but an enhanced role?

Tessa Jowell: I can absolutely give my hon. Friend the assurance that he seeks. It is an extraordinarily important part of the BBC’s remit, as is encouraging more people to buy digital radios in order to benefit from the wide range of BBC and other digital radio services.

We are already at a point where more than 72 per cent. of households are receiving digital TV, but we recognise the risk of a minority, particularly of older people, being left behind. The market has a huge role to play, but in the end it is the BBC that will bring everyone into the digital future. The partnership between the BBC as the major public broadcaster and the commercial sector is what makes the broadcasting landscape in this country unique. I believe, as does the vast majority of public and industry analysts, that that balance has served us well and can continue to do so; but it can do so only if it is examined and adjusted constantly to reflect changes in technology and consumer demand. Because the BBC must always be strong enough to reach every part of the community and every part of the country, it must be the benchmark of quality in every medium.

It must not, however, be over-mighty. It must not crowd out competitors and must not simply reach for the cheque book to beat the opposition. That is the
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tightrope that the BBC must walk. That is the price that it pays for public subsidy. Will it sometimes lose its footing; will the balance always be perfect? Probably not, but the vigorous health of the commercial sector, the BBC and the new media sector in combination is proof that over the years we have got the balance about right. The BBC keeps the commercial sector’s feet to the fire; the commercial sector keeps the BBC honest: that is the best kind of creative tension, and we have institutionalised it in the new governance arrangements.

In making the new arrangements, we are giving the BBC stronger, clearer objectives, obligations to be distinctive and innovative, and a requirement to consider market impact before developing new services. The existing board of governors will be replaced by a trust to hold the BBC to account. It will be closer to the public and further from the executive than the existing system, and, for the first time, there will be a separate, formally constituted executive board— [Interruption.]

Philip Davies (Shipley) (Con) rose—

Mr. Andrew Pelling (Croydon, Central) (Con) rose—

Tessa Jowell: BBC services will have clear service licences, thereby helping to safeguard the health of the wider market. They will define how they contribute to achieving the BBC’s objectives and the trust will hold the BBC executive to account to make sure that those licence conditions are met. The new BBC Trust must weigh up the value to the public of new services and balance them against the impact on the market. We will shortly publish the willingness-to-pay research as part of the consultation on the level of the licence fee. That sort of contribution is a vital part of the trust defining itself as the licence fee payers’ advocate. The market impact assessment will be provided by Ofcom and, for the first time, there will be vigorous public assessments of the value of each new development.

Public value—the driving concept behind the new BBC charter—is about much more than simply asking people whether they like a particular idea or proposed new service. It is much more related to gaining an in-depth, sustained understanding of public preferences and how they change in response to the services provided with their money. That should be a continuing two-way process of mutual education between the public and the BBC about its public values and how BBC services will benefit the wider market.

The principles of responding to the public, achieving greater efficiency and investing in Britain’s digital future will also underlie the forthcoming licence fee settlement. We are in discussion with the National Audit Office about how we examine the BBC’s future efficiency, as part of the licence fee settlement, so that we can get an established baseline against which to judge the BBC’s future efficiency programme.

Mr. Redwood rose—

Daniel Kawczynski (Shrewsbury and Atcham) (Con): Will the Secretary of State give way?

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Tessa Jowell: All sides are keen to know what the settlement will contain, but this is a sum that is greater than its parts. The future of the complex ecology of the media industry depends on getting that right, and we will announce the outcome later this year and in good time for the new licence fee to be in place by April 2007.

The BBC is more than just another broadcaster. By its very constitution, it exists to serve everyone in the United Kingdom, wherever they live, whatever their income and whatever their views. It is a place where the whole nation meets as equals. Its owners are the British people—the people who pay the licence fee. It must not be beholden to shareholders, ratings or Governments. Alongside the NHS, it is part of the fabric of our lives, and is unlike any other institution.

The new charter and the agreement before the House today are the result of the widest consultation on the future of the BBC ever undertaken. I am therefore confident that our proposals embody the public’s wish for the BBC to continue to serve the nation in the next 10 years, as it has done for the past 80, and I commend them to the House.

Madam Deputy Speaker (Sylvia Heal): I must advise the House that Mr. Speaker has selected the amendment in the name of the Leader of the Opposition.

6.1 pm

Mr. Hugo Swire (East Devon) (Con): I beg to move, in line 3, at end add

I welcome the debate today. I am grateful to the BBC for agreeing to publish its annual report early, and the House can now have a full debate on the charter and the state of the BBC. I am particularly pleased that the Secretary of State has been able to join us today. We are fortunate that the debate was not scheduled over the lunch hour.

I am also grateful to the BBC for giving me the opportunity to see some of its recent technological advances: podcasting, on-demand viewing and mobile downloads show that the BBC is embracing the future, and I know that millions of viewers across the country will be looking forward to the day when the House can be seen on high-definition TV, although that creates nervousness among some Members on both sides of the House.

The report reaffirms that we in this country are uniquely fortunate to have such a highly regarded public service broadcaster. We welcome the decision to renew the BCC’s charter, but we have a duty to ensure that the BBC is fit for purpose. We cannot shy away from the uncomfortable trends revealed in the BBC’s annual report. Audience share is down. Audience reach is down. Ratings among younger viewers are down. Pension liabilities are up. Executive pay is up. Presenters’ salaries are up.

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We must all be concerned at the decline in audience figures. The future of broadcasting will see a revolution in viewing habits, as the Secretary of State has said, as we complete the move from a five-channel era to one of almost limitless choice. Audiences will become increasingly fragmented. We will see a huge increase in specialised on-demand viewing. Broadcasting will increasingly be more about narrowcasting.

Mr. Redwood: My hon. Friend is making some very telling points, unlike the Secretary of State, who quite wrongly conjures a vision of the people’s BBC out of the air. Does my hon. Friend agree that the way to have a people’s BBC is to give everyone a share in it in return for our licence fee, so that we can then settle its future and do something better with it?

Mr. Swire: That is a little bit too radical for me, but my right hon. Friend makes an extremely intriguing point, and I hope that he will agree with most of what I have to say this evening, even if I stop short of his suggestion.

Like most major broadcasters, the BBC’s audience share is already steadily declining, yet unlike many other broadcasters, which are dependent on falling advertising revenue, its income is steadily increasing. For that reason, the BBC must maintain broad public support if it is to continue to be funded in that unique way.

I am pleased that measures outlined by the BBC show that it will continue to put the emphasis on quality programming. I am confident that it can look forward to a strong future in that respect, but it is our responsibility to ensure that the BBC is independent, well regulated and appropriately funded. That is where the charter renewal process fails.

The new regulatory framework proposed in the charter is flawed. The new BBC Trust does not differ sufficiently from the old BBC board of governors—a system that we all agree was untenable. The new trust threatens to be insufficiently detached from BBC management to be a truly independent regulator—it will be made up of the same people, just based in a different building. The BBC will still effectively act as its own judge and jury, especially in the absence of any adequate appeals system against the trust’s decisions.

I still see no reason why Ofcom, which already has some regulatory powers over the BBC, could not be a truly impartial and rigorous regulator for the whole BBC. It is particularly important to have strong independent regulation, as the BBC continues to expand into new technologies and new media. There are instances of its breaching its requirement to provide services that are both distinctive and complementary to those already provided by the commercial sector.

I welcome the window of creative competition, changes to the BBC’s fair trading policy and Ofcom’s increased role in conducting market impact assessments, but more should be done, which is why the charter represents a missed opportunity to establish once and for all a more settled relationship between the state-funded BBC and its commercial competitors. For example, Conservative Members have long believed
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that the BBC should have only a very narrow role in publishing books and magazines.

Although I accept that UK plc gains from the BBC’s involvement in technological advances, we cannot ignore the possibility that, given its almighty spending power and commercial weight, it will stifle competitors and make it untenable for others to be more profitable in newly emerging markets. Can the Secretary of State confirm whether she has heard as much concern as I have from other media organisations that the charter does not do enough to prevent predatory competition?

Let me focus for a moment on the BBC’s online dominance. The Secretary of State must be aware of the strong arguments against a single service licence for online content. Can she give an undertaking today that the BBC will be subjected to a transparent approval process for new online services? What guarantees are there to ensure that it will not unfairly crowd out its competitors?

I mentioned earlier the importance of appropriate funding for the BBC if it is to maintain full public confidence over the next 10 years—something that, I am sure, hon. Members on both sides of the House would like. We now know that it has submitted a bid for an eye-wateringly large increase based on the retail prices index plus 2.3 per cent., under which the licence fee would go up from about £130 to £180 by 2013. At that rate a £200 licence fee is not much further away. Does the Secretary of State not realise that such a high licence fee risks damaging the BBC’s public support?

The Secretary of State will have seen in the coverage of the BBC’s annual report that one senior executive is reported to have accumulated a pension pot of £3.85 million. That comes at a time when the corporation is to close its final salary pension scheme to new employees and raise the retirement age to 65. Does the Secretary of State realise the danger of having, on the one hand, seemingly huge benefits for top executives, and on the other, a bid for unprecedented licence fee increases?

The wider debate about executives’ salaries is also important. At a time when the BBC is cutting staff and asking for more money from the licence fee payer, the public will be concerned by the news not only of the pay increases for senior executives, but of multi-million pound deals for presenters. There has already been an intervention on that point. Surely it is hard for the BBC to argue that that will not lead to super-inflation when, rather than

in respect of pay, as has been suggested, it is increasingly the market leader. Indeed, the PKF report states that the

and that

PKF also shows that between 2002 and 2004 the wage rates of Sky, ITV and the average top 100 radio and TV companies were lower than those of the BBC. The licence fee should not be a blank cheque to outbid and outprice everyone in the marketplace.

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